There are many different kinds of trusts. There are bare trusts, mixed trusts, interest-in-possession trusts, and accumulation and maintenance trusts. And while they each differ slightly in the way they work, they all basically do the same job – they allow the owner of an asset (the settlor), to distribute or donate it (or confer benefit from it) to another person, group or organisation (the beneficiary) without giving them control of the asset, so long as it remains in trust.
Of course you might be tempted to ask, if you’re giving money or property to somebody, why you wouldn’t want them to have full control of it, and there are as many answers to that question as there are types of trust. You may want to put money into a trust fund for children or grand children, but you suspect that giving youngsters control over a large sum of money may not deliver the results you were hoping for. In that case, a bare trust would allow you to manage the money via a trustee until such time, as stipulated by you, the money is fully released to the beneficiary.
Trusts can also be used to donate to your favourite charity, either during your lifetime or after your death, and by allowing you to choose the trustees, a trust enables you to maintain a degree of control over how the money is spent. So trusts offer a very effective means of distributing or donating your wealth to those people or groups you’d like to benefit from it.
If you’re considering creating a trust, you need to think very carefully about which type of trust will give you most control and be most tax-efficient. And that’s where it pays to seek the advice of a professional.